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A tangled case

After jousting with Constellation Brands Inc. for some eight years over an allegation that Constellation’s Arbor Mist wine cooler’s name infringes on their tiny regional winery’s Arbor Hill label, John and Katherine Brahm last month won a judge’s OK to have their complaint aired in a trial.
Not likely to make history in the annals of trademark law, the Brahms dispute might long be remembered in the local legal community for the yield-no-quarter battle it has sparked between two local legal titans.
Handed down Feb. 26 by U.S. District Judge Charles Siragusa, the 43-page decision came after a hard-fought court campaign of pre-trial maneuvers in a case whose twists and turns could be fodder for a daytime drama.
In a 2003 order, Magistrate Judge Jonathan Feldman, who heard arguments in the trademark dispute for more than two years before Siragusa took it over, described the relatively straightforward trademark dispute as “giving birth to a plethora of additional claims” involving “a tangled web of accusations and counter accusations sadly involving two of Rochester’s finest law firms.”
Feldman refers to Nixon Peabody LLP and Harter Secrest & Emery LLP, the area’s largest and second-largest law firms.
Nixon Peabody initially represented Constellation, but pulled out as the company’s lawyer in 2004. The law firm remains in the case as a defendant, however, facing malpractice and breach of fiduciary duty accusations leveled by the Brahms in a third-party sub-complaint. It is also the plaintiff in another sub-complaint seeking to disqualify Harter Secrest.
Harter Secrest attorneys remain involved as the Brahms’ lawyers and in defense of their own firm.
Attorneys representing Nixon Peabody, Harter Secrest, Constellation and the Brahms declined to comment on the cases.
In 2005, after more than two years of unsuccessfully urging the parties to sever the additional claims from the federal trademark case and argue them instead as a separate matter in a state court, Feldman lamented in another order that “disputes between the lawyers and the law firms have become even more acrimonious, while the merits of the underlying trademark case remain in their litigation infancy.”
Behind the trademark flap lies a skein of role reversals and shifting allegiances among the Brahms, their winery, Constellation and the law firms that arguably fueled the case’s wider-ranging disputes.

Wine industry

Longtime partners in marriage and in Arbor Hill Associates Inc., John and Katherine Brahm have owned and run their winery and gourmet foods firm in Naples since the late 1980s. It is a boutique operation. John Brahm states in an affidavit that they had hoped to grow the operation to national scope. But that ambition is far from realized.
Arbor Hill has reached beyond its tiny roadside store on a country road in Naples by building an Internet business, and its products are sold regionally in restaurants and liquor stores as far away as Saratoga Springs. But though its wines have won prizes, they have never come close to approaching the hundreds of millions of bottles in sales Constellation claims for Arbor Mist.
In one court pleading, the Brahms characterized the dispute as a battle pitting “one of the world’s smallest wineries against the world’s largest.”
Before starting Arbor Hill, John Brahm in the 1980s partly owned and ran Widmer Wine Cellars, a Yates County winery that Constellation-then known as Canandaigua Wine Co.-acquired. Six months after it bought Widmer, Constellation fired Brahm, who with his wife decided to start a new winery, Arbor Hill. Helping to organize their new business was the couple’s longtime law firm, Nixon Peabody.
Constellation at that time was a client of Harter Secrest. In 1995, however, the Harter Secrest partner who had long handled the Constellation account, James Locke III, jumped to Nixon Peabody. A member of Constellation’s board since 1983, Locke took the Constellation account with him.
When the Brahms first decided to press an infringement claim against Constellation, they did not broach the idea with their own law firm, which by that time was also Constellation’s firm, but instead started with a Rochester trademark and patent boutique, Cumpston & Shaw. By the time talks with Constellation started, Cumpston & Shaw had been acquired by Harter Secrest.
Court papers detail talks between Harter Secrest partner Kenneth Payment and Constellation’s original lawyer in the case, Nixon Peabody litigator Richard Rochford, first taking place in spring 2001. By fall 2002, the talks stalled. Payment by then had warned Rochford that a lawsuit could be likely, court papers state, but had agreed to give Constellation three-day’s warning before it lodged a court complaint.
But before the Brahms could act, Constellation sued first, filing an action in the U.S. Western District of New York’s Rochester division in October 2002. That complaint is the case in which Siragusa’s recent decision came. It asks the court to declare that Constellation’s Arbor Mist brand does not infringe on Arbor Hill’s trademark but also accuses Arbor Hill of infringement.
Preemptive strikes by potential defendants looking for an edge in court-known as declaratory judgment actions-are common in patent and trademark cases. Often, having served the purpose of signaling the filer’s willingness to fight in court, they die quiet, unnoticed deaths. This one touched off a firestorm neither side seems to have sought or anticipated.
Constellation’s case against Arbor Hill partly relies on the two brands’ relative size and coverage area. Arbor Mist’s far-larger coverage area should trump Arbor Hill’s claim on the Arbor name, Constellation maintains in its court complaint. But the brief also argues that if either name infringes, it is Arbor Hill’s, whose first wines went on the market after Constellation started distributing a Batavia-bottled wine called Arbor Valley. For that alleged infringement, Constellation seeks treble whatever damages a court might award.
Arbor Hill countered with motions stating its own case for Constellation’s alleged infringement and disputing Constellation’s claims.
Both sides filed summary judgment motions-Constellation seeking to have Arbor Hill’s trademark infringement claim declared null and Arbor Hill seeking to have its beef aired in court. Those motions were only the start of the action.

Issues over firms

The Brahms began by asking the court to disqualify Nixon Peabody for an alleged conflict of interest but later expanded their complaint to add breach of fiduciary duty and malpractice charges.
In their court filings, the Brahms paint themselves as loyal clients unjustly spurned by an ungrateful Nixon Peabody.
“In an economically driven decision,” the couple’s brief states, Nixon Peabody threw them over for a chance to serve a newer and far wealthier client.
In court papers, the Brahms detail a 40-year history as Nixon Peabody clients. Katherine Brahm’s deceased uncle, George Hawks, had been a partner in Nixon Peabody’s trusts and estates department. And partly because of the family connection, the couple’s brief states, the Brahms had used Nixon Peabody to do estate planning since the 1960s.
In 1982, they hired Nixon Peabody to help John Brahm arrange a leveraged buyout of Widmer and to set up Arbor Hill Partners, which Brahm first formed to acquire Widmer. Later, the partnership-in which John and Katherine Brahm are each 50 percent partners-kept Nixon Peabody on retainer for the next 15 years, the couple’s court complaint states.
Documents filed in the case show that only a few days after offering to update Arbor Hill trademark work for the Brahms in spring 2001, Nixon Peabody fired the Naples winery as a client, stating in a written communication that “given the firm’s current relationship with Constellation Brands, we respectfully must decline to accept any engagement from Arbor Hill.”
Also detailed in court papers is an exchange between Brahm and Nixon Peabody partner John Witmeyer, who had long done the couple’s trust and estate work, in which Witmeyer urged Brahm not to pull their estate-planning work from Nixon Peabody.
Witmeyer’s and Brahm’s conversation, a telephone exchange that took place shortly before the firm dismissed Arbor Hill, is detailed in an e-mail from Witmeyer to Rochford and in a declaration by Witmeyer. Both were filed as evidence by Nixon Peabody.
“Having become aware that Nixon Peabody was representing Constellation in a dispute with Arbor Hill early in May 2001,” Witmeyer states in the declaration, “I called (John Brahm) to discuss the situation on May 24, 2001. In that conversation, Mr. Brahm raised no concerns.”
A memo from Witmeyer to Rochford describes the conversation as “a nice, cordial call.”

Expert’s view

Roger Cramton, an expert witness hired by the Brahms’ legal team to analyze Nixon Peabody’s conduct in the case, took a darker view.
Cramton is a former Cornell University Law School dean and current Cornell Law emeritus professor and the co-author of texts on legal ethics and conflict-of-interest rules. In a 23-page declaration, examining the Brahms’ history with Nixon Peabody from a number of angles, Cramton finds little to commend Nixon Peabody’s conduct.
In Cramton’s view, Witmeyer’s contact with John Brahm was itself an ethical breach. In cases where conflicts of interest are an issue, the declaration states, disciplinary rules forbid contacts between a non-lawyer client unaccompanied by his own lawyer and an attorney with an opposing firm.
The Brahms’ would have been well within their rights to drop Nixon Peabody, but the law firm violated disciplinary rules when it fired Arbor Hill, Cramton adds. Even if the relationship between Arbor Hill and the law firm had been properly terminated, the legal expert states, Nixon Peabody still would have been open to conflict-of-interest charges for representing Constellation against its former client. Nixon Peabody’s continued handling of the Brahms’ estate planning further compounds the breach.
In deciding to take Constellation’s side in the trademark case, Cramton concludes, Nixon Peabody created a situation in which it would be virtually impossible for the firm to act without committing a serious ethical breach: As advisers to Arbor Hill in the precise area in which it was now suing the Naples Winery on behalf of a rival, Nixon Peabody could not possibly avoid using privileged information against its own client. And if it were to win the case for Constellation, Cramton added, the Brahms would be in line for damages for the bad legal work Nixon did in the 1980s, when it researched and registered the Arbor Hill trademark for them.
“If Arbor Hill’s trademark is in fact invalid,” Cramton states in the declaration, “Nixon’s prior work for Arbor Hill was incompetent. On the other hand, if that work was competent, Nixon’s current attack on (the Arbor Hill trademark) is frivolous, harassing and prejudicial to Arbor Hill.”
For its alleged breaches, Cramton asserts, Nixon Peabody should not only be liable for damages owed to the Brahms but also should be ordered to disgorge “the substantial fees it has earned in its improper representation of Constellation.”
Cramton’s declaration also takes Nixon Peabody to task for stalling for more than a year on a request from John Brahm to turn over any Arbor Hill files in its possession. Though it agreed to comply with Brahm’s initial request and with several later requests for the files Payment sub-mitted, Cramton states, Nixon Peabody failed on a number of occasions to deliv-er the files, only acceding to the requests after Payment asked the court to compel a turnover.
Discovered among the files and submitted by Harter Secrest as evidence in the trademark case was a brief but colorful evaluation of Katherine Brahm’s personal wealth. Included as a parenthetical aside in a handwritten memo on the tax consequences of organizing Arbor Hill as an S corporation, it reads, “She’s loaded.”
In an answering brief to the Brahms’ malpractice complaint, Michael Wolford of the Wolford Law Firm LLP in Rochester, one of several lawyers representing Nixon Peabody in the trademark case’s third- and fourth-party actions, denies Nixon Peabody had any liability to the Brahms or Arbor Hill. To the contrary, he asserts, Harter Secrest erred in not uncovering and advising the Brahms of Constellation’s pre-existing Arbor Valley label. Insofar as Arbor Hill took Harter Secrest’s advice in persisting with the case, the Wolford brief argues, Harter Secrest, not Nixon Peabody, is guilty of “malpractice, negligence or other improper conduct.”
Siragusa’s Feb. 28 ruling, which deals exclusively with the trademark case, does not specifically comment on the legal malpractice claims and counterclaims. A single paragraph in the decision addresses Constellation’s Arbor Valley claim.
“(Arbor Hill) never observed any Arbor Valley wine being sold in Western New York,” the ruling states. “Moreover, although (Arbor Hill’s) attorneys (at Nixon Peabody) conducted a trademark search in 1987 in connection with the federal registration of the Arbor Hill mark for food products, the search did not reveal Constellation’s use of the name Arbor Valley.”
In giving Arbor Hill a go-ahead to pursue its trademark complaint, Siragusa evaluated the Naples winery’s case according to how well it met the standards of six Polaroid factors, so-called after Polaroid Corp. v. Polarad Electric Corp., the 1960 case that set the current standard in trademark law. Siragusa gave Arbor Hill an edge in four of the six Polaroid factors.
In March, Constellation attorney Allen Baden, an intellectual property lawyer in Kenyon & Kenyon LLP’s Silicon Valley office, filed an 11-page motion calling on Siragusa to reconsider his February 28 ruling. Dispensing with the customary wait for Arbor Hill’s lawyers to file a countermotion, Siragusa fired back on March 14 with an eight-page response unequivocally affirming his earlier ruling.
No trial date is set.
[email protected] / 585-546-8303

04/11/08 (C) Rochester Business Journal


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